Global Energy Transition Faces Major Hurdles Ahead

BloombergNEF’s New Energy Outlook 2025 paints a striking picture of the global energy transition, showing that while renewables and electrification are accelerating due to market forces, the current trajectory falls far short of meeting net-zero goals. Global electricity demand will rise by 75% by 2050, fueled primarily by the rampant expansion of data centers fueled by artificial intelligence and digital infrastructure. Data centers alone will account for 3,700 terawatt-hours (TWh) by 2050, representing almost 9% of total global electricity demand, ultimately outpacing heating and cooling as one of the biggest energy consumptions.

The report finds that to satisfy the stratospheric demand for data centers by 2035, another 362 gigawatts of power-plant capacity must be constructed. Although renewables and storage will supply well over half of this capacity, fossil fuels are still likely to supply 64% of the incremental generation. This dependency may keep coal and gas plants operating longer, making the road to decarbonization more challenging globally.

Clean technologies, especially renewables and electric vehicles (EVs), remain healthy on economic competitiveness more than policy directives. Renewable power generation will double by mid-century, providing 67% of the world's electricity demand. While that is happening, EV take-up is predicted to increase exponentially, with two out of three passenger cars expected to be electric by 2050. Passenger EV sales are expected to hit 42 million units by 2030 and nearly double to 80 million units by 2050. Even as this happens, the transition is against significant headwinds. Increasing interest rates, trade restrictions, and deficiencies in key infrastructure have the potential to slow the growth of clean technology deployment.

The future for fossil fuels is uncertain. While demand for oil around the world is set to reach its peak in 2032, it will still be resolutely high at 88 million barrels per day by 2050. Coal takes a precipitous fall, but natural gas takes a divergent trend. In Bloomberg's Economic Transition Scenario (ETS), global demand for natural gas is expected to grow by 25% from 2024 to 2050, driven primarily by expansion in the United States. This growth reflects the long-term persistence of fossil fuels in the world energy system, especially in industries like gas and aviation, where substitutes are less competitive or more difficult to scale.

Net-zero enablers like hydrogen, CCS, sustainable aviation fuels, and low-carbon industrial processes are still not making headway without policy support. In contrast with the success case of renewables and EVs, these technology areas are still niche in the ETS case because they are expensive and have no regulatory push. Heat pumps, a key technology for the decarbonization of space heating in homes, will account for only 25% of heating in cold-climate buildings by 2050, while industrial emissions are barely reduced.

In the United States, even with continued political changes and regulatory ambiguities, the clean energy transition is still on track, albeit slower. Solar capacity will more than triple and battery storage capacity increase six-fold by 2035. While this is a slowdown from Bloomberg's 2024 base case, it is not a derailment of the transition as a whole.

There is a silver lining in the near term: 2024 may be the first year of prolonged global carbon dioxide (CO₂) reduction, which could herald a structural change in emissions trends. Bloomberg's analysis credits three-fourths of the emissions avoidance up to 2050 to the use of clean power technologies. Yet despite this progress, the ETS estimates only a 22% cut in global emissions by 2050, which would still leave an estimated 2.6°C of warming — light-years away from the 1.5°C goal agreed at Paris.

The message from BloombergNEF's report is stark: while market forces are pushing the deployment of renewables and electrification forward, they are not strong enough to deliver the deep decarbonization required to avoid the most devastating effects of climate change. Without strong policy action and strategic investment in more difficult-to-abate sectors, the world will stay off course to net zero. Clean energy remains an attractive and necessary investment, but achieving the full potential of the global energy transition will require far greater momentum driven by policy, innovation, and cross-sectoral collaboration.